As interest rates continue to rise unabated, many of our clients are finding that things are getting tight. They are wondering what to do. Well, the first step for many people is to see if you can reduce that rate of interest.

The basic rule here is that there is never any harm in asking your current lender to simply give you a better rate. In many cases, if they can, they will.

Consider a recent example of a couple with two loans: a principal and interest home loan and an investment loan. Both loans are secured against residential property, with quite a bit of equity. The couple  sent a simple email to their lender, gently stating that they felt a little aggrieved that the lender had passed 12 interest rate rises on in full, and hinting that they were looking at other options. (Importantly, everything they said was true). They were very pleasantly surprised when the lender immediately came back to them with a proposal to lop a full percentage point off the interest rates payable on their loans.

It turns out, of course, that lenders are receiving quite a few queries from people asking the very same question. They are also seeing people move lenders to get better deals. And so they are ready for the question when you ask it.

Often, we don’t make a request like this because we are shy or we think it is impolite. But it isn’t. Especially if we ask it politely! The lender working at the bank negotiates interest rates with borrowers all day long. Asking them to re-negotiate with you is no less polite than asking a taxi driver to drive you somewhere. It’s their job.

We might also be reluctant to ask because we are scared that the answer will be ‘no.’ That is, of course, what the sign behind the counter tries to say: “Please don’t ask for credit as a refusal may offend.” But ask yourself: why should a refusal offend? Let’s say you ask your lender to drop the interest rate. They state simply: “I am sorry, but the rate you are paying is the lowest we can offer.” How is that offensive? In fact, given that now you know that you are paying the lower rate possible, you probably feel better.

Remember, someone saying ‘no’ is not even a loss. Let’s say you are paying 6% on your home loan right now. Your ask your lender to do better, and they say they cannot. So, you are still paying 6%. That means, of course, that you have not lost anything by asking. So, no in this case means ‘no change.’ Now ask yourself what about if the lender says yes, and shaves even a few basis points off the rate you are paying. Now you are better off.

So, asking for a better deal means (i) you can’t go backwards; and (ii) you might go forwards. That sounds like a sensible thing to do!

Asking for a cheaper interest rate might do you good but in any event, it cannot do you any harm. Not asking might not do you any good either. But it might mean you go on paying more interest than you need to. Asking can be good or neutral; not asking can be neutral or bad.

So, ask!